The U.S. labor market recovery is unstable. Data released yesterday showed a small increase in U.S. initial jobless claims last week, further indicating that the recovery in the labor market is not stable. Analysts point out that if these data continue to be uninspiring or not moving towards full employment, this leaves room for the Fed to not be so anxious to consider a tapering schedule. Agency surveys show that the Fed could announce its strategy to cut its massive bond-buying program in August or September. But most respondents do not expect to start slowing the pace of monthly purchases until early next year. The yield on the 10-year U.S. Treasury note fell for an eighth straight day, falling to 1.25 percent intraday, the lowest level since February. the dollar retreated from a three-month high on July 8, and
Gold closed slightly lower. The drop in U.S. bond yields lowered the opportunity cost of holding non-yielding gold, and then yields recovered slightly from their lows and stocks recovered some of their losses, putting pressure on gold prices. Gold should still be supported as a safe-haven asset, however, especially given concerns about the U.S. job market recovery and the Delta Coronavirus variant. Overnight, gold saw a long-short tug of war and eventually closed slightly lower.
ECB sets new inflation target. The ECB will set an explicit inflation target of 2%, changing its previous vague statement of “close to but below 2% in the medium term”, and will also allow inflation to exceed 2% if necessary. Analysts said that this approach will give the ECB more room for maneuver. But the long-term low growth of the eurozone economy, some member states have the risk of bankruptcy, the banking system is also relatively fragile, and there is no long-term solution to these problems, in this case the ECB how to push inflation to 2%, which is a problem waiting to be solved. The euro rose slightly against the dollar, recovering from this week’s oversold levels.
The UK awaits a full unblock. The EU said in an assessment that the U.K. owes the EU 47.5 billion euros as part of the Brexit deal, a figure higher than the U.K.’s initial estimate. This account could trigger new negotiations between the EU and the UK. The British pound could be dragged down by this event. The market is currently waiting for the UK to lift the embargo, which will give a boost to the pound.
Crude oil stopped falling and rebounded. The US released a 70% higher-than-market-expected drop in EIA crude inventories last week, with commercial crude stocks excluding strategic reserves falling by 6.866 million barrels to 445.5 million barrels. Oil prices rebounded on Thursday as a result, but uncertainty over production increases due to divisions within OPEC limited crude gains.
Dollar may strengthen, but only moderately
Citi believes the dollar should strengthen, but will only rise moderately in the coming year. The Fed is expected to reduce stimulus ahead of the ECB and BOJ, but the dollar is unlikely to appreciate sharply as the Fed is still expected to lag behind many other central banks in terms of tightening policy and growth momentum indicators. The dollar index is expected to rise to 93.28 over the next 6 to 12 months.
Inflation spike only temporary European pound may fall to 0.84
Rabobank believes that if the dollar continues to lead, the pound may continue to struggle in the coming months, while the euro may fall toward 0.84 against the pound over a six-month period. the spike in UK CPI data will be temporary, so the Bank of England’s interest rates are expected to remain stable through 2023; although the Bank of England’s intention to complete its quantitative easing program by the end of the year may provide the pound with some support, but it may take some time for the EURGBP to find the momentum to break lower.
Gold bounces at trend line, remains bullish above 1739
Commerzbank says it continues to maintain a bullish view on gold prices as they bounce before falling to the 2019-2021 uptrend line corresponding to 1739. The initial resistance for the gold price rebound is expected to be the 200-day SMA at 1829, followed by resistance at 1857.25, 1916.91. On the downside, gold prices could go to the March lows in the 1676.80-1677.73 range if they fall below the Fibonacci 78.6% retracement of 1728.90.
14:00 UK GDP may show strong performance
First of all, to focus on the UK will be released in May three months GDP monthly rate. From January to April this year, the UK GDP recorded negative values for three months, and the April data increased to 1.5%. The agency commented that the data was largely in line with expectations, which is the result of the easing of epidemic restrictions and the rebound in economic activity. Considering the progress in recent weeks, the economy is expected to improve further in May and June.
Currently, the market expects the monthly rate of UK three-month GDP in May to be 3.9%, which may be negative for the pound if the published value is lower than expected; conversely, it may be positive for the pound.
In addition, the monthly rate of British manufacturing output and industrial output and other data will be released at the same time, you should also take into account.
19:30 ECB expected to maintain a cautious stance
Next, let’s look at the ECB’s upcoming June meeting minutes. Last month, the ECB left its three key interest rates unchanged and expects rates to remain at current or lower levels until the inflation outlook converges strongly within its forecast range, close enough to, but below, 2%, and that convergence has continued. The ECB confirmed that it will significantly accelerate the pace of purchases under its emergency anti-epidemic bond purchase program during the quarter, which will continue until at least the end of March 2022.
ECB President Lagarde said that there are some different views on the pace of purchases under the Emergency Anti-Disease Debt Purchase Program. Will be discussed in due course to withdraw from the emergency anti-epidemic bond purchase program, but it is still too early. From a comprehensive point of view, the ECB will emphasize that it will accelerate the pace of bond purchases, but need to pay attention to the parties for when to reduce the expression of the bond purchases, if the voice of the early reduction of bond purchases strengthen, the euro may be supported.